Investors on the troubled Zimbabwe’s Stock Exchange are losing money, as stock prices plummet due to a worsening economic situation in the country.
THE Zimbabwe Stock Exchange (ZSE)’s turnover for August dropped by 38 percent to US$7 million on the back of persistence liquidity challenges being experienced locally.
Trades on the local bourse were mainly propelled by foreigners.
ZSE market capitalisation marginally grew in August to US$2,86 billion from US$2,85 billion in July.
The industrial index edged up 0,42 points to close at 99,26 due to gains in a few heavyweights.
Among the top movers were Barclays, Padenga and Old Mutual adding 20 percent, 11,70percent and 11,19 percent, respectively.
Significant losses were recorded in National Tyre Services, African Sun and Willdale, shedding 29,41 percent, 19,33 percent and 11,76 percent in that order.
Investors on the ZSE are losing money, as stock prices plummet due to the worsening economic situation in the country.
A total 35 stocks closed in the red during the first six months of the year, with at least 27 of these falling by double digit figures. This means investors became poorer than they were during the same period last year.
Year-on-year to June 30 2016, counters such as manufacturing firm Medtech Holdings lost 50 percent of their value.
This has resulted in a crisis on the equities market, where investor sentiment has been hit by low returns, a volatile political situation and declining corporate earnings.
In August the mining index gained 2,33 points to 26,32 points, although Bindura Nickel Corporation recorded a significant 9,09 percent loss in the period.
Total volumes traded fell 26,99percent to 41,26 million shares.
Zimbabwe is still heading in a direction where risk aversion will remain key to investment decisions. As such, the market is not expecting a better performance from ZSE as long as the country fails to holistically address issues to do with policy consistency, ease of doing business, indigenisation and economic empowerment laws, attraction of Foreign Direct Investment (FDI), cost of funding and labour laws.
This outlook appears to suggest that Zimbabwe’s fiscal space will remain tight, while disposable incomes and capacity utilisation in the industrial sectors will remain low. This will further weigh down the stock market.
Commenting on ZSE’s outlook, stock brokers, Lynton-Edwards, said: “We expect economic headwinds to continue mounting in 2016, hence impacting negatively on the upside potential of the market. Economic theory stipulates that there is a strong positive correlation between stock market performance and economic growth. Our view is that there are no economic stimuli in sight which will likely improve the country’s economic fortunes in 2016.”
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